This invention relates generally to systems and methods for cost altering payment services (“CAPS”), including receiving additional risk mitigating payment transaction (“RMPT”) information; and altering a payment transaction cost based on the received additional RMPT information.
Errors and fraud are key risk elements in controlling costs for payment processing. Lowering the incidence of errors and fraud may lead to lower payment processing costs, which in turn may help lower payment management service fees. Risk of error may be minimized by providing correct payment transaction information that may be substantially verifiable by the payment processor and/or the payer entity. Typically this may be done by a point of sale terminal system (“POS system”) including items of information in a payment transaction that may be consistent with verifiable information pre-associated with the purchaser and/or merchant account. In order to minimize errors, the focus essentially is on the quality of the information.
Unfortunately, in the instance of fraud, the quality of the payment transaction information may be error free, but the purchaser may be someone other than the “legitimate payment account user” (i.e., the account owner or authorized account user). Therefore, to mitigate fraud risk, the quantity of payment transaction information may be important in combination with the quality of that information.
Given the increasing popularity of both on-line and telephone assisted purchasing, electronic payment information such as primary account number, account owner's name, expiration date, billing address and card verification code (e.g., three or four digit code such as CVC, CVV, etc.) are easily subject to compromise and cannot be relied upon to provide consistent account security. Shared secrets are also subject to compromise, but some forms such as a password can be changed so as to end the compromise and restore security. New technologies such as geo-location and biometrics are potential candidates to augment more traditional purchaser credentials. However, regardless of the technology, fraudsters will come up with ways to compromise or defeat new technologies. Therefore, it is increasingly clear that payment security mechanisms need to evolve to be more adaptable and more easily propagated (as opposed to being nearly static and difficult to field quickly and broadly). POS systems are essential to any such evolution of security. Some POS systems may need to be replaced outright, but many may be updated to support new security features. But in order for that to happen, merchants need to be motivated to invest both money and time.
Lowering a merchant's payment transaction costs is a powerful and effective means to motivate that merchant. However, lowering payment transaction costs can hurt the revenues of the merchant's payment management service provider. Fortunately, when payment management service is considered as a form of arbitrage, a potential win-win proposition is possible. If the payment management service provider can lower their own payment processing costs by decreasing the risk of error and fraud, they can then share a portion of that cost savings by lowering the payment transaction costs charged to the merchant.
In addition to having the means to motivate a merchant to improve payment security, the payment management service provider also needs ways to inform the merchant; and then having both informed and motivated the merchant, needs ways to enable the merchant to acquire and provide additional RMPT information. In some instances, additional RMPT information may be electronically readable from the payment implement, but in many instances, the purchaser may need to be prompted by the POS system operator (or automated terminal). To some extent this is already being done. For example, many gasoline pumps prompt for billing zip code when fuel is purchased with a credit card.
The increasing popularity of various forms of virtual electronic payment such as Google Wallet, Dwolla and PayPal may cause some merchants to update their POS systems to distributed enhanced payment compatible systems that may be updated with down-loadable technology. But many merchants, particularly sole proprietors with smaller, older and/or more primitive POS systems may be unaware that their POS systems may be providing a smaller than possible amount of RMPT information and therefore unnecessarily inflates the merchants' transaction costs. Many such merchants deal with intermediaries such as POS system developers or independent sales organizations; and therefore such intermediaries need to be informed of the cost saving potential of providing additional RMPT information and also motivated to spread information and encouragement to their merchant customers.
The enhanced payment management system (“EPMS”) is a key component of a CAPS system. In addition to providing facilities to support the payment transactions of a CAPS system, the EPMS may also provide facilities for determining potential cost benefits of providing additional RMPT information prior to making changes to the merchant's payment management services (“the service set”) and corresponding changes to the merchant's POS system. Given that the merchant's cash flow is at stake, the typical merchant may be loath to make changes without a strong likelihood of cost savings. Such a facility for determining potential cost benefits may be useful to both merchants and merchant-associated intermediaries such as independent sales organizations and POS system developer.
In order to communicate additional RMPT information from the POS system to the EPMS, the operation of the POS system must be adapted. The EPMS may facilitate such adaptation with “transaction guidance”. Distributed enhanced payment processing system compatible POS systems may receive transaction guidance in the form of down-loadable technology. Transaction guidance may also be propagated by less immediate means, for instance utilizing specifications, sample code and API documentation.
Additionally, having revised the service set and updated the POS system to acquire and provide additional RMPT information that the EMPS may utilize so as to alter transaction costs, the merchant and any associated intermediaries may have a very strong interest in seeing a demonstrable cost benefit. Therefore, the EPMS may provide payment transaction cost information back to the merchant.
In order to acquire RMPT information so as to decrease the incidence of errors and fraud, a CAPS system may serve merchants and associated intermediaries by informing, motivating, enabling, benefiting and confirming beneficial results. Sharing additional RMPT information-based transaction cost alterations may be a major motivator. However, alternative factors, such as an increase in charge backs, may serve as motivation. Additionally, even if the merchant revises the service set and updates the POS system to acquire additional RMPT information, that does not mean purchasers will provide that additional RMPT information. Nonetheless, the costs of error and fraud will continue to increase and so chip away at the merchant's bottom line.
It is therefore apparent that an urgent need exists for systems and methods for receiving additional RMPT information; and for altering a payment transaction cost based on the received additional RMPT information. Once the merchant has selected a service set that includes transaction cost altering based on receiving additional RMPT information, transaction guidance may be provided that facilitates the acquiring of additional RMPT information by the merchant POS terminal system. Such a service set may be selected at the time of merchant boarding or subsequent to merchant boarding. Cost profiles and cost indices may be provided that facilitate merchant consideration of the potential cost altering benefits of different service sets. CAPS systems serve a need that is fundamental and undeniable by allowing merchants to alter payment transaction costs by acquiring additional RMPT information and including that information in payment transaction requests received by the EPMS within a CAPS system so as to alter payment transaction costs.